Northeast Utilities (NU)

Q4 2010 Earnings Call

February 25, 2011 1:00 pm ET

Executives

Charles Shivery - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Leon Olivier - Chief Operating Officer, Executive Vice President and Chief Executive Officer of Western Massachusetts Electric Company

David McHale - Chief Financial Officer and Executive Vice President

Jeffrey Kotkin -

Analysts

Paul Patterson - Glenrock Associates

Christopher Ellinghaus - Wall Street Access

Jonathan Arnold - Deutsche Bank AG

James Dobson - Wunderlich Securities Inc.

Presentation

Operator

Compare to:
Previous Statements by NU
» Northeast Utilities CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Northeast Utilities Q2 2008 Earnings Call Transcript
» Northeast Utilities Q1 2008 Earnings Call Transcript

Welcome to the Northeast Utilities Q4 2010 Earnings Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] I will now turn the call over to Mr. Jeffrey Kotkin. Mr. Kotkin, you may begin.

Jeffrey Kotkin

Thank you very much, John. Good afternoon and thank you for joining us. I'm Jeff Kotkin, NU's Vice President for Investor Relations. Speaking today will be Chuck Shivery, NU's Chairman, President and Chief Executive Officer; Leon Olivier, NU's Executive Vice President and Chief Operating Officer; and David McHale, NU Executive Vice President and Chief Financial Officer. Also joining us today are Jim Muntz, President of our Transmission group; and Jay Buth, our Controller.

Before we begin , I'd like to remind you that of the statements made during this investor call may be forward-looking as defined within the meaning of the Safe Harbor Provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, which may cause the actual results to differ materially from forecasts and projections. Some of these factors are set forth in the news release issued yesterday. If you have not seen that news release, it is posted on our website at www.nu.com. Additional information about the various factors that may cause actual results to differ can be found in our annual report on Form 10-K for the year ended December 31, 2009, and our Form 10-Q for the third quarter of 2010. Additionally, our explanation of how and why we use certain non-GAAP measures is contained within our news release and in our most recent 10-Q and 10-K.

Now I will turn the call over to Chuck.

Charles Shivery

Thanks, Jeff. And I'd like to thank everybody for joining us this afternoon. From all aspects, 2010 was a very good year for Northeast Utilities, its customers and its shareholders. David will cover the financial details of the quarter and the year, but I'd like to hit the year's high points.

Earnings for the year were well beyond our initially projected range of $1.80 to $2 per share. That was due to a combination of factors, including strong cost control, sound operations, a hot summer and the impact of midyear rate decisions. Earnings growth last year exceeded our 6% to 9% long-term growth rate, and we continue to increase our dividend at a rate that is faster than the industry average.

As you know, earlier this month, our Board of Trustees approved a 7.3% increase in the dividend to an annualized amount of $1.10 per share, the 11th consecutive year we have had a dividend increase that exceeds the industry average.

In terms of how we serve our customers, we continue to see a number of successes. The benefits to customers from the transmission upgrades we completed in Southwest Connecticut has saved electric customers more than $600 million since they were completed. We continue to invest more than $400 million annually, improving the reliability of our three state electric distribution system. Our new customer information system has allowed us to dramatically improve our response rate to customer inquiries.

Our communities benefit from the improved reliability of our facilities; property tax revenue generated by our new equipment; by our employment levels, which have remained steady; and by our corporate philanthropy, which reached record levels of nearly $5 million in 2010. Heeding the call of Connecticut's new Governor Malloy, we are ensuring that the state is open for business by improving our reliability, streamlining our processes and implementing some of the most aggressive energy conservation programs in the country. In 2010, CL&P's energy conservation expenditures totaled approximately $120 million, including $43 million invested in the commercial and industrial sectors. In Transmission, we received final approval of the Greater Springfield Reliability Project this past fall and have already begun construction, and ISO New England confirmed the need for the Interstate Reliability Project. In addition, we received strong remarks for the operation and security of our transmission system.

On February 11, FERC approved the Transmission Services Agreement associated with our new Northern Pass transmission line to import power from Hydro-Québec. That approval was a significant next step in the process. FERC recognized our TSA, the product of more than a year of negotiations, as uniquely beneficial to our region. It approved our requested initial Return on Equity of 12.56%, our requested 50% equity, 50% debt capital structure and our fully tracking cost recovery tariff.

We expect the Northern Pass line to commence operation by the end of 2015 and immediately provide New England's electric customers with an attractive combination of economic benefits, a significant reduction in fossil fuel consumption and a very real reduction in New England's greenhouse gas emissions. We will provide you with a summary of our work as we continue to move this project forward.

On the distribution spot side, despite an unusual level of storm activity and a very hot summer, we maintained a reliable system, improved our customer service metrics and significantly reduced our uncollectible balances. We also secured approvals from our Connecticut and New Hampshire regulators to continue to invest heavily to replace our aging distribution infrastructure and completed half of a new gas pipeline linking our LNG facility in Waterbury with a significant load center in the Wallingford/Cheshire area. The project will reduce gas congestion on the Yankee Gas system and help our customers lower their fuel costs and emissions.

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